Serrala at the Credit Expo

It's time for the biggest event for the credit management sector in the Netherlands: the Credit Expo. This year's Credit Expo is all about High Performance: a pragmatic management method that allows you to achieve significantly better results by working smarter.

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How smart onboarding gets you more good customers

Many suppliers in todays’ subscription economy use automated credit scoring during their customer onboarding process. Important reason to do this is to prevent fraud or non-paying customers. Often this score only leads to a binary decision: the customer is accepted or not. Black or white. Resulting in saying no to a group of potential customers that might have had the intention and the funds to pay.  And saying yes sometimes to people that might lack one of the two. The scores are after all just probabilities whether someone can and will pay the bill.

If 1 is the smallest chance and 999 is the highest chance, then the supplier draws the line somewhere, say at 400. But someone with 500 can be a bad debtor and someone with 300 a loyal customer. Missed revenue on the top line, missed profit or loss on the bottomline.

Possibilities to deal with this phenomenon in a smarter way often stall because of technical constraints, commercial issues with damaging conversion or financial arguments not to take certain customers on board. GDPR restrictions on automated decision making in relation to consumers can also play a role. How does your company deal with these imperfections and credit scores? A down payment in advance is a very effective solution.

Fraudsters out, customers in

The best example we have amongst our customers is a West-European telco company that we partner with and work for since a few years. They suffered from substantial fraud by people who onboarded online for a subscription and a brand-new smartphone. The phone was delivered, but bills were never paid, and the customer could not be found or chased.

What to do? They did not want to change the risk score nor the online onboarding process. What they did do is introduce a category in between accepted and not accepted. People falling in this grey area will receive an email after their onboarding with a request to do a down payment. The amount depends both on the risk score and the value of the product chosen. Please pay €150 and we will ship your phone straight away. The email helps the client to pay: it contains a dynamic payment button enabling the customer to pay direct online from the message without having to key in amount, reference or IBAN account number. Payment takes place with an irrevocable credit transfer. The smart email sees when the payment authorization was successful and shares that information with the telco and the customer. And the brand-new smart phone is shipped the same day.

Stunning results

The results are tremendous and partially unexpected. The primary goal was to reduce fraud, which was achieved with flying colours. Fraud was reduced with 75%. But also an impressive revenue growth occurred, reducing the pay back time on the investment into four days. How? By being able to say yes to customers that got a no previously. People that do a down payment provide a very strong indication that they will continue to pay. Today we analyse together with the telco the data every day to see how we can further optimize the process. For example by offering more payment methods. We also found out that the conversion depends significantly for the type of phone being purchased. This allows us to differentiate the approach.

Other use cases

Shipping an expensive smartphone is a clear use case for this approach. But we notice the same in other sectors: a utility requesting a down payment for providing energy. A wholesaler only delivering to SME’s when part of the bill has been paid. An insurance company requesting a first term for customers with certain credit scores, by combining the direct debit mandate request with a real payment.

This way your payments and collection strategy can also provide a substantial contribution to your new business and the customer journey. Above and below the line.

Jeroen Dekker
ABOUT THE AUTHOR | Jeroen Dekker
Jeroen Dekker joined Serrala Solutions in 2016 after 15 years at international B2B software companies as bridge between market(ing) and product. He was product manager and spokesperson for the Financial Crime Risk Management Solutions of Fiserv. Jeroen holds degrees from the Haarlem Business School and Northern Arizona University.

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